Falling Mortgage Interest Rates Raise Hope

Mortgage rates have fallen to around their lowest levels in eight months, offering a potential boost to the housing market after a rough patch in recent months.

The average rate for a 30-year fixed mortgage fell to 4.51%, matching the lowest level since last spring, according to data released Thursday by mortgage-finance giant Freddie Mac. That rate is still higher than its level of 3.95% from a year ago but has fallen from a more-than-seven-year high of nearly 5% last fall.

The decline stands to give consumers another shot at obtaining low rates on loans to purchase or refinance their homes.

Premier Sotheby's International Realty has teamed up with one of the most competitive lenders in our industry, Fidelity Bank Mortgage, and as a consumer (and first time home-buyer myself!) I am not being biased when I say they have some of the best programs available.

Okay, so I am a little biased. Full disclosure: my bulldog businesswoman mother, Stephanie Whiffen, has just joined on as our preferred lender in my office located on Vanderbilt Beach Road. This is a woman who has 30+ years of experience in residential mortgage lending, and another 10+ years of experience on top of that in the commercial & residential real estate markets. (#humblebrag She sold her first home at age 18, while my grandfather was a land developer in Berkshire County, Massachusetts)

Many people (public and professional) do not understand the intricacies of mortgage financing, so I'd like to present a little Q&A I put together with one of the best in the business.

Q: How are you feeling this beautiful Tuesday morning, Ma?

A: I had a Naples Area Board of Realtors Membership committee meeting at 9:00am, because I am the new Vice-Chairperson. They are doing things a little bit differently than the past, and it's exciting.

Q: Why don't you tell me a little bit about how Fidelity Mortgage Bank differs from the competition?

A: Their service; their systems are easy to navigate, while still being up-to-date technologically, they are very personal. You saw it when you & Matt [your fiance] were submitting your loan application last week! I've never worked for a bank or lending institution in which you have the capability to upload all of your documents, link your assets and liabilities, and submit the myriad of information lenders need today as seamlessly as our system allows you to. It makes my job in document accumulation, and the borrowers job in getting me that documentation, so much easier and stress-free.

Q: What do you think the biggest hurdle for the Naples first-time home buyer will be in 2019?

A: It's not just 2019, it's always. I think that the first-time home buyer needs to go through a pre-qualification process because unfortunately many of them have too much debt. Although interest rates are low, many are still not in a place of affordability. Whether it be car payments, car leases, credit cards, etc. they have too much debt and generally speaking, very little savings, as both are indicative of each other. My best advice is to get them in front of a mortgage lender so that we can guide them into a position of success rather than failure. They also have to be keenly aware of property types, ie. condos vs. single family homes vs. HOA communities, etc. All of those differences factor into what they can afford at their bottomline. Working with an experienced Realtor who understands lending, and is aware of the different community types that affect a mortgage payment or homeowner's insurance will not only find them the property they are looking for, but alleviate the heartache of thinking they can buy one thing then realizing down the road, they cannot.

Q: What do you think the biggest benefit of mortgage lending in such a cash-heavy luxury market [Naples] is?

A: From the perspective of that caliber of buyer, it would be two-fold: the ability to continue investing their liquid assets, and a tax benefit.

Reinvesting of assets: Let's say someone took a million dollar loan at a 5% interest rate. They can reinvest their million dollar liquid cash and as long as that money is giving them a rate of return higher than 5% they have more return on their money in that year's time.

Tax benefit: Deducting the mortgage interest on the million dollars, generally speaking. If they took out a $1M loan at 5% for 15 years, their first year's interest would be approximately $50,000. Generally speaking, as everyone's tax liability varies by personal situation, they could take that $50,000 as a tax deduction of income.

Many very wealthy and financially savvy consumers go this route, whether they have the money to buy in cash or not. They let their money work for them while interest rates are still at all-time lows.

Q: Do you have a favorite part of your job? Or the lending process?

A: I thoroughly enjoy sharing my knowledge to assist consumers and agents alike, and helping both achieve their goals. Buying a home, whether it is your first time or your tenth time, is always a major life event. The greatest joy I have is watching my customers and colleagues benefit from my years of experience.

Q: With so much new construction occuring in our local market, and many of these 'big-box builders' offering incentives towards closing costs if you use their lenders, what would be the benefit of working with you and Fidelity Mortgage Bank for someone trying to navigate which one to choose?

A: The first step is to compare interest rates. Go back to the old adage, "you get what you pay for." In other words, most often when you do a line by line cost estimate comparison you will find although they're giving you, for example $10,000 towards Closing Costs, they are making up the difference on some other line; whether it be a higher interest rate or points (percentage of the purchase price); they can't give it away for free. An outside lender, generally speaking, won't be giving you $10k towards closing costs, but more than likely can offer you a lower interest rate. In which case, over time, on the first 2-3 years you will save the same or more amount of money that you were getting as an incentive. Nothing in this world is free, so generally speaking they are packing that cost somewhere. Banks do have the ability to price a loan higher so that they can give you the additional money towards closing, but it'll be your choice. Lastly, the benefit you always have is the lifelong relationship with a bank, whereas after closing your relationship with the builder and their lender is usually very limited.

Thank you, Ma, for spending some extra time this morning answering these questions for my blog. I think the power of information is invaluable, and while Naples can be a bubble, financing can be such an asset.

A wise mentor of mine once said, "All I need in this business is a good attorney, inspector, and lender, and I can do anything." Well, Stephanie Whiffen is the best. Contact her here to get pre-approved, or to discuss some of Fidelity Mortgage Bank's programs (including a long-term floating rate lock program that is perfect for our current market!) And then let me help find that home of your dreams. It's waiting for you, I promise.